Celent Says

The Build vs. Buy Debate

Nicolas Michellod
Insurance Experts' Forum, October 5, 2011

Celent will publish soon a research updating a report published in 2007: The Build vs. Buy Debate. This report will draw the result of a survey we launched earlier this year in order to gather a perspective from insurers regarding the build or buy question for different types of system and components, that cover the full spectrum of the insurance system landscape from the front-end to the back-end. The survey results demonstrate that insurance companies are going to prioritize the buy approach in the future and this not only for core systems but also for certain non-core systems. Actually, there are four methods that are still to be considered by insurers when replacing a system:

* Build. There will always be insurance companies who prefer building applications internally and we think these companies will look for accelerators or frameworks from third parties. It is important to understand that the build approach is commonly used in continental Europe in all size of insurers.

* Wrap and extend. This approach assumes some re-usable legacy code, which is wrappered and exposed to an enterprise service bus. Wrap and extend is typically used to keep back office functionality and radically update new business capabilities. Mid-size insurers in both the US and UK where there is not a large legacy estate tend to use this approach in addition to French mutuals.

* Best-of-breed package. Nowadays many insurers want to choose components that are best-in-class. These companies prioritize functionality richness over cost of integration. This approach requires strong IT skills in integration and clear enterprise architecture. It is a common approach in North America and increasingly so amongst large insurance companies in Europe.

* End-to-end package. The priority with the end-to-end package approach is cost of IT over functionality. This is a typical choice of small and mid-size insurers in Europe.

A combination of risk appetite and quick benefit is leading to a best-of-breed approach in the long run and insurers are part way through legacy modernization programmes that will ultimate address their system segmentation approach. For more details about this topic I invite you to read the report we are going to publish on our website and whose title is: The Build vs. Buy Debate: An Update from the Insurance System Landscape.

This blog has been reprinted with permission from Celent. Nicolas Michellod is a senior analyst in Celent's insurance practice, and can be reached at nmichellod@celent.com.

The opinions posted in this blog do not necessarily reflect those of Insurance Networking News or SourceMedia.

Comments (1)

Will there be an attempt to determine why projects fail? Capturing candid comments from the field would be useful for those considering the "build" or "wrap-and-extend" route.

Posted by: William B | October 10, 2011 10:58 AM

Report this Comment

Add Your Comments...

Already Registered?

If you have already registered to Insurance Networking News, please use the form below to login. When completed you will immeditely be directed to post a comment.

Forgot your password?

Not Registered?

You must be registered to post a comment. Click here to register.

Blog Archive

Insurance: The Next Generation (Part 2)

The Internet of things and the burgeoning number of smart devices coupled with cognitive computing will offer a more evidence-based, real-time approach to managing risks.

Social Media Turns the Sales Funnel Upside Down

If you can reach one member of a group with content that meets the criteria for contagious content, then they are likely to share with others.

Insurance: The Next Generation (Part 1)

Insurers are at a moment when their technological capabilities can be used to improve many of the legacy issues plaguing the industry.

Predicting the Future Becomes Reality

A recent Big Data experiment showed 70 percent accuracy in predicting crime in certain locales. The implications go far beyond that.

Social Media for Insurers — Stop Counting and Start Measuring

Measuring goes beyond just accumulating fans and followers: it looks at the contribution to business.

Keys to Successful Policy Administration System Upgrades

Celent surveyed 44 North American insurers to find answers to the major challenges of upgrading policy admin systems.